Tuesday Morning – IEA Adjusts Demand Growth Outlook

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Group Sentiment Watch: Negative. Yesterday the bloodletting continued early in the U.S. trading session followed by an anemic recovery rally as crude retraced a majority of its morning losses. I continue to think it is best for me to stay on the sidelines aside from some near worthless August positions and my equity positions. The group continues to lack traction with only the refiners showing real signs of life (see below) and even those seem pretty tentative at present. Good time to do homework on picks for a more stable commodity price environment.


In Today's Post

  1. Holdings Watch
  2. Commodity Watch
  3. Stocks We Care About Today
  4. Refining Multiple Update
  5. Odds & Ends

Holdings Watch: No changes.

Commodity Watch:

  • Crude Oil fell $0.75 to $114.45 yesterday as another rally in the dollar and weaker July month imports of crude weighed on prices. This morning crude is trading up over $115 this morning after early weakness. Oil still looks poised to retreat to $110.
    • IEA Adjusts Global Demand Estimates. I still say call price elasticity what it is "demand growth erosion, not demand destruction"
      • 2008 global demand revised down by 100,000 bopd to up 790,000 bopd which represents 0.9% growth over 2007 levels of 86.9 mm bopd
      • 2009 revised up by 70,000 bopd providing for growth of 930,000 bopd, yielding 2009 consumption of 87.8 million bopd, up 1.1% from 2008 levels.
      • The U.S. is seen falling 3.2% annually for 2008 and 2.0% for 2009.
      • The rise comes from Asia and the Middle East.
      • Chinese demand is seen up 5.7% next year.
    • OPEC July Output Up. IEA says OPEC produced 145,000 bopd more in July than June at 31.11 mm bopd. They say current OPEC surplus is a slim 1.5 mm bopd but that they expect this to increase in 2009 to 3 mm bopd with added supply from Saudi.
    • Non-OPEC supply forecast raised. IEA estimates Non-OPEC supply will climb 455,000 bopd in 2008 and 650,000 bopd in 2009; both figures are up 100,000 bopd from previous estimates.
    • Russia / Georgia Ceasefire. Being reported this morning.
    • BP Shuts Sup'sa Pipeline. BP closed the 115,000 bopd pipeline today running from the Caspian Sea to the Georgian capital out of concern over the conflict.
    • BTC Pipeline Fire Extinguished, But Still Out Of Service. Repairs are expected to be completed in 1 to 2 weeks. The PKK rebels have vowed more attacks in Turkey and on the 1 mm bopd pipeline.
    • Iran Finds More Oil. Iran said it discovered 3.7 billion barrels of oil in 4 new fields along with associated natural gas. The largest of the fields contains light oil, something Iran has not been finding of late and will eventually be capable of producing 230,000 bopd when brought online.


  • Natural Gas rose a dime to $8.35 yesterday shrugging off the weaker crude. Reasoning for the "rally" was simply that NG has fallen too swiftly and came despite a much cooler than normal forecast for much of the U.S. This morning gas is trading up slightly but I would not get excited until we see Thursday's inventory data and a break in the falling trend for crude oil.
    • Imports: Down 3 Bcfgpd from year ago levels.
      • LNG dipped slightly from the prior week coming in at 0.8 Bcfgpd, down 2.1 Bcfgpd from year ago levels. Current gas prices are definitely not high enough to lure LNG this way at this time, the recently established peak season for imports.
      • Canadian volumes were 8.9 Bcfgpd, up a  0.1 Bcfpgd  week to week but down 1.0 Bcfgpd from  year ago levels.
    • Electricity: despite the cool air last week, electricity generation for the U.S. grew 2.1% from the "hotter" prior week but was down 0.4% from year ago levels. All available data suggests gas-fired generation continues to gain share amongst generation sources. The Edison Electric Institute which provides weekly estimates of electrical generation says generation is up 0.7% ytd vs 2007 levels (more flatscreens, ipods, etc).
    • Tropics Watch: 92L, mid-Atlantic, getting more organized, likely to develop into a tropical depression next 24 to 36 hours.


Stocks We Care About Today

(CHK) Completes Woodford Sale, Talks About More "PXP-Style" Transactions. (CHK) completed its sale of its Woodford Shale assets to (BP) for $1.7 B. The company says it will now focus on selling down 25% of its plays in the Fayetteville and Marcellus Shales in the same manner in which it brought on PXP as a partner in the Haynesville in a part cash up front, part carry of future development costs.

HK Secondary Priced. 25 mm shares at 26.53 or about half what they were at 6 weeks ago. They list as use of proceeds among other things repaying indebtedness on their senior revolved. On the 2Q call on the Aug. 8 they indicated nothing drawn on their revolved and $500 mm in cash. Little slight of hand there.

(BRY) To Be Added...


Crack Spread Update:

Two weeks of improvement, I know, I know, hold me back but it beats the continual destruction we saw throughout the second quarter. Given that crude inventories remain low relative to year ago levels and products remain relatively well stocked, I wouldn't be looking for a charge to significantly higher levels. On the other hand, things may be looking up for margins as consumers probably haven't really changed their driving habits and people are going to  begin seasonally stocking their heating oil tanks as the calendar progresses towards winter.

Refiner Multiples:  Still dirt cheap...

... But EPS Estimates Still Falling. The following table summarizes the one month drop in Street Consensus estimates for the independent refiners. Not pretty ....

... But The Refiners Are Being Bottom Fished For A Trade On Falling Oil. Oil peaked at $147.31 (intraday) on July 15, since then take a look at how oil, gasoline, heating oil and the refining group did. I think a little more refining group is warranted and could serve as a decent hedge during this trying time for E&P.

A Quick Look At The Majors. These guys are getting increasing notice for being extremely cheap. Here's the table of valuations and heres the look at how they did over the same time frame as the indie refiners above. These are earnings numbers, not cash flow so they are something everyone in the broader markets can get their head around and they are extremely cheap with forwards valuations below levels seen in over a decade.


Odds & Ends

Analyst Watch: B of A upgrades (COG), (CRK), (KWK), (SGY) and (WLL) from Neutral to Buy. (PVA) upped to buy at SunTrust.






97 Responses to “Tuesday Morning – IEA Adjusts Demand Growth Outlook”

  1. 1
    kaman Says:

    Morning Z-
    I am probably overextended at this point (too), but not so much on August calls….are you thinking of pulling in horns farther out? For example, I’m holding Sept and Oct calls in some names like PKD, PQ, etc… I’m not looking for name-specific response, rather what you think of a turnaround or return to sanity by the Fall.

  2. 2
    Nicky Says:

    Morning all. Crude did hit the Gann support line overnight and bounced. I ‘can’ count a completed wave down now but levels to take out are 116.90, 119 and then 121. Taking out 121 would convince me that A or 1 down was complete.

    If the overnight lows are taken out then likely we test 110 before bouncing. 200 dma is at 107 area. If 110 is taken out then likely we are looking at 102…

  3. 3
    zman Says:

    I hear ya K and I’m holding what I have for now, just adding. Not sure you can tie a return to normalcy to the calendar close enough to say September will be ok or not relative to October for a bounce but I do think we will see a reversal in natural gas pretty soon…this won’t be big without a storm and w/o a stabilization of crude and therefore probably won’t mean much to the gassy stocks as they will likely pay attention to crude even if they produce relatively little of it. On oil, everyone has gotten so bearish that nothing bullish counts. Yesterday’s weakness was attributable to Chinese imports falling in July. They’ve been up all year and they fell in July due to curtailments before the Olympics…the Chinese has shuttered hundreds if not thousands of factories to reduce pollution. End of games, restart of factories. Also, the lifting of gasoline prices will probably not curtail demand as much as the restart of several previously uneconomic mom and pop refineries will boost it. All of this will take time to see and therefore September or October. Note the EIA’s estimates today are still calling for positive demand growth.

    On the stocks, bigger will likely be better at first so once XOM gets its sea legs in the Majors and APC, DVN, XTO in the large cap E&P and SLB and HAL in service we’ll have a better notion that a recovery is in the offing. The little stocks pop for a day on news and are lower 2 days later and that’s a tough way to try and trade.

  4. 4
    VTZ Says:

    Keep in mind that as soon as this russia georgia thing is over they will say things like “uncertainty and risk removed” and those risks are likely helping to prop up crude a bit.

  5. 5
    zman Says:

    BRY on the tape increasing its thoughts on its diatomite heavy oil project.

    Increased production, increased reserves in place. Still taking a look but I’ll likely do nothing for a bit as oil is already selling back and we’ve seen green in the first 15 before with a very red close. I just don’t trust these moves.

  6. 6
    zman Says:

    Anyone see a broker note on SD today?

  7. 7
    john11 Says:

    From Tudor Pickering re SD…This morning..
    SandRidge behavior (SD – $33.15 – B) – Somebody big has to be blowing out of SD. Stock ticked down 20% intraday yesterday on 7x normal volume…not normal trading with group down only 2-3%. Says someone wanted out badly/fast. Recovery off bottom to finish “only” -12%. Who knows if seller cleaned up..but giving great entry point for investors who’ve previously missed this solid story. It’s gonna double from here. $75 NAV.

  8. 8
    Sambone Says:

    By Maya Jackson Randall

    WASHINGTON (Dow Jones)–International Monetary Fund officials said the peg of
    the Saudi riyal to the U.S. dollar has been a great “anchor” for the Persian
    Gulf but recommended that Saudi officials consider alternative exchange rate
    regimes if inflation worsens.
    “Most directors considered the benefits of maintaining the peg to outweigh the
    cost of higher short-term inflation, provided current inflationary pressures
    prove temporary,” IMF board directors said in a report on Saudi Arabia released
    Tuesday. “If, however, inflation should persist and the Gulf Cooperation
    Council monetary union be delayed, they recommended to consider also
    alternative exchange rate regimes.”
    According to the report, some IMF officials believe that given the limited
    role of monetary policy and the riyal’s undervaluation, all policy options –
    including alternative rate regimes – should remain under review in Saudi
    Meanwhile, the directors urged Saudi authorities to monitor inflation
    developments closely.
    The IMF officials also said Saudi Arabia should further expand oil production.
    At the same, however, they recommended that Saudi officials invest more
    capital in infrastructure, education and public services as a way to diversify
    its economy from oil and natural gas.
    The IMF directors said high oil prices, a stock market rebound and the peg of
    the riyal to the U.S. dollar have all worked to help make the medium-term
    outlook bright for Saudi Arabia.
    But they said rising food prices and infrastructure issues are serious
    challenges to the positive economic picture. A sharp drop in oil prices and
    high domestic inflation that would arise from a further depreciation of the
    U.S. dollar are serious risks, they added.
    “Inflation, fuelled in large part by rising food import prices and
    infrastructure bottlenecks, has accelerated recently, and poses the main
    challenge for the authorities in the period ahead,” they wrote in the report.
    The IMF officials also urged Saudi authorities to further tighten current
    spending and to more narrowly target water and energy subsidies. They said
    Saudi officials should focus on creating jobs and containing inflation.
    “In view of the limitations imposed on interest rate policy by the currency
    peg, fiscal constraint will be critical,” the IMF directors said in the report.
    The IMF officials welcomed the strong growth performance in the country and
    highlighted Saudi Arabia’s “highly positive” external financial position.
    They also lauded Saudi officials’ plans to expand oil production and refining
    capacity to support global oil market stability.
    “Further expansion of oil production will help global oil market stability,
    even if it will boost Saudi Arabia’s external surpluses,” they wrote.

    -By Maya Jackson Randall, Dow Jones Newswires Dow Jones Newswires
    08-12-08 0939ET

  9. 9
    Sambone Says:

    Oil Extends Slide As Market Easing Seen


    [Dow Jones] Crude futures pare some losses but remain pressured, after the International Energy Agency says a tight oil market is easing and Russia halts its offensive in Georgia. Analyst Jim Ritterbusch says that “regardless of headlines, we look for the complex to continue to exhibit apathy toward any bullish news while posting a strong response to any fresh bearish indications.” Indeed, oil has fallen despite the hostilities in Georgia, home to a major pipeline. Nymex Sept crude -70c at $113.75/bbl. (greg.meyer@dowjones.com)

    Crude Down On Dollar Strength, Georgia Dispute Eyed
    LONDON — ICE Brent crude oil futures fell by more than $2 to fresh three-month lows in London Tuesday, steered by the U.S. dollar strengthening against most major currencies.

    A cessation of Russia’s campaign in Georgia Tuesday also lent some downwards pressure on crude prices, although the conflict — that has raised concerns over the sustainability of supplies through Georgia, an important transit region for crude flows to Europe — has largely failed to bolster crude prices in recent days, with the market instead remaining in the grip of a bearish technical outlook, growing demand concerns and particularly the dollar’s mild recovery.

    “Six weeks ago, events in Georgia would have pushed prices to $160 or higher,” says Peter Beutel of Cameron Hanover. “Now, largely because of a stronger U.S. dollar, we are seeing investors liquidating long oil positions that they purchased with the intention of holding.”

    At 1107 GMT, the front-month September Brent contract on London’s ICE futures exchange was down $1.12 at $111.55 a barrel, having fallen to $110.47 a barrel earlier.

    The front-month September light, sweet, crude contract on the New York Mercantile Exchange was trading $1.41 lower at $113.04 a barrel, recovering slightly from an earlier $112.48 a barrel intraday low.

    The ICE’s gasoil contract for September delivery was down $8 at $1,017.25 a metric ton. The August contract expired earlier Tuesday. Nymex gasoline for September delivery was down 311 points at 283.55 cents a gallon.

    While weakness in the U.S. dollar against most major currencies helped propel crude to it’s heights — crude futures have been seen to offer a hedge against the weakening greenback — so it’s nascent recovery has helped reverse the trend, analysts said, and could pile further pressure on crude prices if it persists.

    “If the dollar continues it’s strengthening path that started last week I can’t see oil prices doing anything than falling further,” said Torbjørn Kjus, oil analyst at DnB NOR in Oslo. “If you look at intraday movements, the dollar movement has been very significant for oil price development down from say $118 a barrel through the last five dollars. But I think the movements have to be quite strong — large movements are affecting the oil price.”

    The euro fell to a five-month, $1.4815 low against the dollar earlier Tuesday, before subsequently recovering back towards Monday’s closing levels.

    Russia’s President Dimitry Medvedev said Tuesday he had ordered a halt to the five-day military offensive against Georgia, with Moscow having achieved its aims of securing Russian peacekeeping forces and the civilian population, Interfax reported him as saying.

    Georgian officials said Russian forces had attacked key pipelines Tuesday, although those allegations were denied by Russian officials. Operator of the Baku-Tbilisi-Ceyhan pipeline, BP PLC (BP), also said it was unaware of any attack on the facility, and similar claims of an assault on the Baku-Supsa pipeline were also dispelled by BP and Russian officials.

    Flows through the BTC pipeline remain suspended following a fire on the Turkish section of the line, and unrelated to the military confrontation in Georgia. The pipe transports on average 850,000 barrels a day of crude from Azerbaijan to the Turkish Mediterranean port of Ceyhan.

    Crude prices offered little response to the developments, although confirmation of a ceasefire could bolster the market’s current bearish sentiment, some said.

    “Given how poorly the markets reacted to the initial reports of fighting, we suspect that prices could sell off yet again if a ceasefire is, in fact, announced,” said Edward Meir, analyst at MF Global in New York.

    Despite the market’s apparent nonchalance toward developments in the Caucasus, the International Energy Agency warned Tuesday that geopolitical factors, as well as healthy Chinese oil consumption, still threatened to tighten market conditions in coming months.

    In it’s August oil market report, the agency said that the tight global oil and supply balance, that’s driven crude prices to record heights this year, is easing but supply uncertainty remains.

    It revised down its forecast for world oil demand growth this month by 100,000 barrels a day from its previous report. Global consumption this year is seen to remain unchanged at 86.9 million barrels a day, up 0.9% on 2007, while demand for 2009 was raised by 70,000 barrels a day, or 1.1% versus 2008, to 87.8 million barrels a day.

    “This news has offered some support to crude prices,” said Sucden Research analyst Andrey Kryuchenkov of the 2009 outlook. However, market participants still remain worried about demand destruction in the near term, he added.

    Mindful of the summer Atlantic hurricane season, market participants continue to eye the development of a tropical low pressure system in the central Atlantic. According to the U.S. National Hurricane Center, a tropical depression could form during the next day or so as the system moves west-northwestward at about 15 mph.

    —By Nick Heath; Dow Jones Newswires

  10. 10
    zman Says:

    Thanks John. Gotta admire an analyst willing to step up to the plate for a second day with that last sentence. I completely agree with them and now the only thing that ever held me back from adding more shares (high ish price to cash flow is now a memory).

    SD trades at 7x 2009 numbers which are likely to come up now.

  11. 11
    Sambone Says:

    Chilean Rains Dry Up US Diesel Export Market


    NEW YORK — Rains in Chile are drying up what has been the U.S.’s strongest oil-export market and could deal a further blow to the reeling heating oil market.

    For months U.S. refiners have been exporting record levels of low-sulfur distillate fuel, or diesel, with booming demand from Chile leading the surge.

    In the first five months of the year, U.S. diesel exports to Chile were 6.4 times year-earlier levels, and topped 100,000 barrels a day in three of five months, gobbling up 25% of U.S. diesel exports.

    But heavy rains have boosted reservoir levels, allowing electricity generators to return to using hydro power.

    Unless refiners can scramble to find other buyers, lower exports may build on already higher-than-expected stockpiles in the U.S. that are already at typical pre-winter levels, well ahead of the start of the season.

    Sliding demand for gasoline and other products in the U.S., the world’s largest oil consumer, amid record high prices, has slashed front-month crude oil futures prices on the New York Mercantile Exchange by $34.55 a barrel, or 23.5%, in exactly a month from a record intraday high of $147.27 a barrel on July 11 to $112.72 a barrel Monday, the weakest level since May 2.

    Analyst James Crandell at Lehman Brothers warned in a recent report that the U.S. “could see a steady drop-off” by year end in distillate exports to Chile and its neighbors, due to an improved outlook for hydro power. He said additional refining capacity coming onstream in Asia will add to what’s becoming a large supply overhang in that distillate-hungry region.

    That falloff in Chilean demand would eliminate the major U.S. export market for a petroleum product that is seeing a rapidly shrinking domestic market.

    Data from the U.S. Energy Information Administration show that domestic refiners produced some 629,000 barrels a day of low-sulfur diesel fuel in May, the most in any month since September 2007, with fully 70% of the output sent overseas.

    With the advent of new environmental rules requiring the use of ultra-low sulfur diesel fuel for an increasing number of on-road vehicles, low-sulfur diesel demand is falling fast. The fuel essentially is used in farming and can be burned as home-heating oil, but would be a considered a premium product for that purpose, where distillate fuel with a higher sulfur-content is more commonly used.

    Heating Oil Price Plunge
    May’s U.S. output of low-sulfur diesel was just 27% of the level in May 2006, EIA data show.

    The dropoff in front-month heating oil futures prices has outpaced the decline in crude. September-delivery heating oil futures hit an intraday low of $3.0842 a gallon Monday, a 25.8% decline from the intraday-record high of $4.1586 a gallon for front-month futures set on July 11. Prices for the peak winter season have fallen by just a slightly slower pace than prices in the summer season.

    EIA data show total distillates on Aug. 1 stood at 133.3 million barrels, the most since 2006 for this time of year and about 5 million barrels, or about 4%, above the five-year average. EIA had predicted stocks would end July at below 128 million barrels, and inventories are already at levels expected for the start of the heating oil season in October.

    In Chile, neighboring Argentina is providing only enough natural gas supplies to meet the needs of central Chile’s residents. Heavy rains have allowed power companies on the country’s central/southern power grid, known as the SIC, to lower diesel purchases and return to greater use of hydro power. About 93% of Chile’s population is served by the SIC.

    Stronger hydro-power generation was evident in June, when a monthly economic index showed growth of 5% versus a year ago, beating the consensus for a 3% rise, mostly due to a rise in lower-cost hydro-power generation.

    Price Diesel Fuel Costs
    Power generators on the northern grid, known as SING, which serves Chile’s copper mining industry, are expected to continue using diesel as they don’t have alternatives, since Argentine natural gas exports are limited, analysts in Chile said. Power providers in the region are banking on a new LNG regasification terminal to come on line in early 2010 and provide an alternative to diesel.

    Spanish utility Endesa SA’s (ELE.MC) Chilean unit, which holds power assets in Chile, Argentina, Peru and Colombia, said July 30 that its physical sales declined in the first half of 2008 in Argentina as a result of lower hydro levels. First-half 2008 operating costs increased 38% due to increased cost of using diesel fuel for power generation in Chile, Argentina and Peru.

    U.S. exports of diesel fuel to Argentina and Peru also hit record levels in recent months, at three to four times the levels of a year earlier, but volumes peaked a well under half the level exported to Chile.

    —By David Bird, Dow Jones Newswires

  12. 12
    zman Says:

    Thanks for the article on Chile Sam. Had not seen their consumption as that high, don’t know if they will really be that hard to replace however as VLO is always talking about sending higher diesel shipments to Europe and Asia, and Canada and Mexico can probably take more of the high sulfur stuff the U.S. can’t use. Lehman has gone uber bear.

  13. 13
    tomdavis12 Says:

    Z: The IEA numbers you mentioned today has supply and demand somewhat even over the next 18 months. Where are the large increases in supply coming from Iran -Brazil? Shouldn’t therefore the price of crude stay in a much more narrow range than this year? Maybe GS will lower their numbers.

  14. 14
    mahout Says:


    Gist of very favorable recommend on NFX by Zacks:
    Raised 2008 and 2009 EPS from 3.33 and 3.57 to 4.37 and 6.38(Would be 6.7 PE at 42.94 close yest. Some PE for a growth company!)

    Continued positive view of NFX reflects strong production-growth profile and attractive valuation.

    Lease acreage accumulated leaves company with wealth of drilling options.

    New projects in Malasia, China and GOM offer significant long-term growth potential. Strong Bal. Sheet, etc.

    Z, if you see a good entry point for this falling knife, please let me know.
    I’ll scrape up a few Bucks for it.
    Thanks for all you do for us.

  15. 15
    zman Says:

    Tom – Big increases seen Saudi, Iran, Iraq, Canada, Brazil. I don’t have a copy of the numbers yet. Norway I think seen up slightly too. No mention of Mex and Russia. Think Russia will act as a force behind the scenes potentially countering Saudi moves form time to time depending on the oil chart. Look at Vlad and Medeyev and tell me they can’t read a chart. Will try to get more details but I’d rather oil stay $110 to $130 for quite some time than go back to prior GS levels. Too tough on globe in near term.

    Mahout – thanks for that and the comment. Will do!!!

  16. 16
    Sambone Says:

    Off subject – General market, from a blog I follow.

    Monday we made this comment that some of our “regulars” thought was worth repeating:
    “If this was a really, really good rally we’d have more good-looking stocks to buy than money. We don’t.”

    Reading some things on the commute home we were amused by this line by Jim Grant –
    “God invented the future to humble the economists, as the value wing of the investment community does not need to be reminded.” We would add that the future can humble all of us in this business.
    Mr. Grant, who is a shrewd enough observer to be a technical analyst, delved into comments made by the famed value investor Mr. Miller. Mr. Miller writes in his recent report to shareholders that it is obvious that he should not have owned homebuilders, retailers or banks and that oil and commodities and related equities were the things to own. Mr. Miller concludes that the credit crisis and the housing crisis will end and the markets will function again. Mr. Grant, however, suggests that Mr. Miller is confusing desirability with probability that these things will come to pass on a reasonable timetable. And while some feel that a durable bottom in stocks has been made, we don’t think the answer is so obvious.

  17. 17
    Nicky Says:

    The restrictions on short selling are due to be lifted tomorrow unless the SEC extends them. Wondering whether it may have contributed to this rally in financials…

  18. 18
    zman Says:

    That’s a good thought Nicky.

    Mid morning check, pretty quiet on the news front, the PBR results not exactly wowing the Street.

    Little EGY flat on results, down from almost 9 to mid fives on this pull back. This is one on my radar for long term stock ownership. Should be a basic report on the reports page on them.

    Otherwise E&P trying to stage a modest rally here.

  19. 19
    elduque Says:

    Re SD – Never did get to talk to the treasurer, but he left a message on answering machine, saying:

    1. Some investors were disappointed in lack of info on a couple of their wells.
    2. Some investors were concerned with their capital expansion program. He said that capital wouldn’t necessarily be raised, but would depend on market conditions.

  20. 20
    ram Says:

    ZMAN – Regarding the GAMBZTARDE that was talked about yesterday – will you talk about it again when it goes away?

  21. 21
    arodeen Says:

    All kinds of new TA are out there! HA!


  22. 22
    zman Says:

    Ram – yes, I took some at $1.35 and another smaller, shall we say wimpy piece, at $0.75; both August $35s so timing was everything there. I’m going to be patient and not add long dateds just yet as this market is simply not to be trusted.

    EOG looking nice(r). 2nd day it has outperformed. Of course, it has been severely beaten down.

    El D – thanks, that what I got out of all my reading too. If you look at the minute chart the SD started falling as soon as Tom Ward said they did not find 1st Caballos in a western Pinon well. Reaction just went silly.

  23. 23
    Popeye Says:

    HK volume almost 3x CHK this am, would the new shares be trading this soon?

  24. 24
    tomdavis12 Says:

    Z: Talked to CHK today. They do not expect peak production from HS for 4- 5 years. I am not sure I heard that on the CC. This will be after Barnett peaks ’09. People that watch CNBC think we have unlimited supply today. Do you have a time frame where supply will significantly increase in the lower 48?

  25. 25
    1520sbroad Says:

    #17 – will be curious to see if that rule gets extended. Has anyone seen a timetabel on that?

  26. 26
    zman Says:

    Tom – H.S. will not add big adds until 2010 or 2011, pipeline constrained until then.

    I think next year L48 production growth comes in at 3 to 5% but that is admittedly pretty back of the envelope. These is no boost from I hub next year, the Barnett is slowing. The Woodford and Fayetteville and several other plays will grow again but the volume growth is not there compared to what Texas has been contributing. If Wyoming comes on strong again I think we get to the mid of that range and if CHK is right and their part of the Barnett keeps on growing like they think along with the Wyo we get to the upper. But I don’t think we see 8% and I do think we will see demand continue to pick up on the electrical front.

    Popeye – gotta be deal related volume

  27. 27
    zman Says:

    BEXP looks like a bargain down here…sitting on hands.

  28. 28
    Sambone Says:



  29. 29
    zman Says:

    Day starting to look familiar re oil trading lower and sapping early strength in the energy patch. They just aren’t ready to buy yet and oil looks lower.

  30. 30
    calvo Says:

    ..following up on the baby & bathwater syndrom: http://www.stocktiming.com/Tuesday-DailyMarketUpdate.htm

  31. 31
    gaamblor Says:

    What does the .7% increase in electricity utilization translate to in BCF/d?

  32. 32
    zman Says:

    Gaamblor – impossible to tell since you don’t how much of it was gas in each month as nukes and hydro vary quite a bit. If you just assumed a constant 21% share for gas of the generation pool, that would be about less than 1 Bcfgpd increase over 2007 ytd (through July). I don’t think that is a reasonable assumption given that demand for the Jan to May period for electrical generation (according to EIA #s for gas consumed) was up 1 Bcfgpd.

  33. 33
    zman Says:

    Nicky – what is that level you were talking about oil bouncing off of? It looks to have done it again.

  34. 34
    Nicky Says:

    Z – we made a slightly lower low (still around about that Gann line) so now looks to me like we need one more move down to new lows – it may chop a bit here but hopefully won’t take out this mornings highs before we make the new low.

  35. 35
    zman Says:

    Pelosi saying she’s open to a vote on offshore drilling tied to a release of oil from the SPR.

  36. 36
    VTZ Says:


    Hooray lets celebrate Brian Hunter. You vaporized a multi-billion dollar fund last year but you’re back!

    It disgusts me that they celebrate people like him.

  37. 37
    zman Says:

    V – agreed, what a jerk that guy is.

  38. 38
    cadillac Says:

    I have really been struggling with the market at these levels. The negatives as I see it are


    Three huge sectors in the economy that are quite frankly in some of the worst straights in 25-30 years and also a huge piece of the average consumers everyday life…and it doesn’t look like there will be a turnaround of these sectors for some time (greater than 1 year).

    Also Commodity/Input prices were rising at an unsustainable pace for any “goods” producer which leads to higher prices/lower margins. (the market seems to be adjusting this quickly, however, I still think prices are still at a historically high level)

    The positives as I see it are

    Relatively low interest rates
    Unemployment still low
    Exports strong
    Ag and Energy doing better than they have in a long time.
    General adaptability of the American Economy

    While the positives are great I still can’t get past the overhanging negatives that need to be worked through before I feel comfortable that the economy has a solid foundation.

    The bottom line is that I have never had less conviction of the direction of the economy as a whole. My eternal optimistic side says put all the chips on the table and let it ride. My cerebral side says wait on the sidelines, keep your powder dry, because the consumer and the economy as a whole could be in for rough sledding for at least another year.

    It certainly will be interesting to see how the “stock market” tracks and whether or not we have seen the bottom of the market.

    While the general market doesn’t directly impact individual stocks I find its a heck of lot easier to make money in them when the economy and markets as whole are moving up.

    Sorry about the long post…but some internal struggles in my mind…I hope I’m not the only one struggling with this issue. Plus its been kind of quiet around here for the last two days.

  39. 39
    zman Says:

    Cad- you aren’t alone in the confusion regarding the directionality of the economy. I’d add that one of the worst periods I recall in the broad market (and by that I don’t mean a crash or even big sell offs) was 1994 when the Fed raised interest rates time after time after time. Just when the stocks would get traction the Fed would tighten and the stocks would jog lower again. Like watching paint dry and very difficult to make money in things like retail, tech, transportation, insurance, biotechs etc. (believe me I tried). I think we eventually will need to fight inflation and then the market will again be subject to that kind of action. If they feel the need to fight it sooner rather than later (as in when the path to growth is not yet established) look out.

  40. 40
    zman Says:

    NG trying to stay positive despite oil weakness. Stocks putting up a green day but it is pretty half hearted. If anything I’d be tempted to add to refiners which are mixed to lower now. On the other hand, equities often precede a reversal in the commodities. Recall they sold off early July and oil did not peak until 2 weeks later….

  41. 41
    Sambone Says:

    NEW YORK (Dow Jones)–Federal energy analysts cut their forecast for the
    average price of U.S. spot crude this year, responding to oil markets’ steep
    fall over the last month.
    In their monthly Short-Term Energy Outlook, released Tuesday, forecasters at
    the Energy Information Administration predicted benchmark West Texas
    Intermediate crude oil will average $119.09 a barrel in 2008. That is $8.30, or
    6.5%, lower than the agency’s prior outlook of $127.39 a barrel.
    The adjustment marks the first time the EIA has lowered its 2008 crude oil
    price outlook since September 2007. At the time the agency foresaw crude prices
    averaging $71.17 a barrel this year. The agency is the independent statistics
    and analytical wing of the U.S. Department of Energy.
    The EIA’s revision reflects crude’s recent price swoon. Through Monday,
    Benchmark crude futures on the New York Mercantile Exchange have declined 21%
    from their July 3 record close of $145.29 a barrel. Gasoline and heating oil
    prices are off by similar percentages.
    “Prospects for improved oil market fundamentals over the next 18 months point
    to an easing in the market balance and price weakness over the near term,” the
    agency said in its outlook.
    The EIA said slower U.S. and global oil demand growth, increased production
    from the Organization of Petroleum Exporting Countries and more supply from
    outside OPEC raise the chance of a drop in demand for OPEC crude oil and an
    increase in surplus capacity.
    “Downward price pressures would increase if the economic slowdown proves
    deeper or longer than expected, and if higher prices lead to lower consumption
    and lower demand for OPEC crude than currently anticipated,” the EIA said.
    Next year the agency expects crude will average $123.58 a barrel, down from a
    previously forecast $132.75.
    After last month projecting gasoline would average more than $4 a gallon next
    year, the EIA now anticipates it will retail for $3.82, a 6% revision downward.
    The EIA expects 2009 gasoline prices will be 4.6% higher than the predicted
    $3.65 average price this year.
    The agency also trimmed its gasoline price forecast for this year’s summer
    driving season by 4% to $3.82 a gallon.
    “Gasoline prices are expected to continue falling slowly, averaging just less
    than $3.80 per gallon over the next few months,” the EIA said. “This forecast
    reflects continuing weak gasoline margins because of the decline in gasoline
    consumption and growth in ethanol supply.”
    This winter, U.S. heating oil prices will average $4.33 a gallon – 32% higher
    than last winter’s price, the EIA said. Diesel, like heating oil a distillate
    fuel, is expected to average $4.18 a gallon this year and $4.27 next year at
    “These higher prices reflect strength in diesel demand, particularly in
    emerging markets, which has significantly increased the margins between diesel
    prices and crude oil costs from those of last year,” EIA said in its outlook.

    -By Gregory Meyer, Dow Jones Newswires

    Dow Jones Newswires
    08-12-08 1248ET

  42. 42
    Nicky Says:

    Cadillac – fwiw if you are looking for overall direction with the economy and broader market the technical analysis may provide some guidance going forward.

    As I see it from a fundamental perspective right here and now this rally is based on ‘hope’! The background is getting worse not better and in housing despite the fact everyone is trying to call a bottom this really is not the case. In fact sub prime is now leading onto prime, which will be followed by credit card debt and so it goes on.

    In looking at the charts we are in a period of consolidation after the lows were put in in July and this could go on for some time. In previous bear markets you would often see a period of consolidation/rally that could last 6 – 9 months leading everyone to believe the worst was over, when in fact the worst was to come.

    When the next leg down does come it should absolutely dwarf what we have seen so far. I am not trying to sound alarmist but from a technical perspective I think it looks like we will at the least test the 2002 lows. The next cycle low is not likely to be seen until late 2009/2010.

    Z – I was going to ask in light of this -obviously if people on here are interested and agree – that maybe we have some discussion in thenext few weeks/months on ‘vehicles’ that can be used to make money in a bear market. Because the plus about this is that the market will go down very quickly and its perfectly possible to make very good money on the downside.

  43. 43
    Sambone Says:

    NEW YORK (Dow Jones)–The U.S. government Tuesday raised its forecast for
    growth in domestic natural gas production, saying it expects output to rise 8%
    this year over 2007, and an additional 3.7% next year.
    In its monthly Short-Term Energy Outlook, the Energy Information
    Administration cited “robust growth” from unconventional production basins in
    the lower 48 states, while output from the U.S. Gulf of Mexico is expected to
    be unchanged this year from 2007.
    The EIA last month forecast 2008 U.S. production growth of 6.4%, and a 1.6%
    rise for next year.
    Consumption of gas is expected to rise 3% this year and 1.7% in 2009, with
    growing demand seen across all sectors, the EIA said. The strongest growth is
    expected from the power sector, at 3.4% in 2008 and 3.1% in 2009, as gas-fired
    power plants account for a bigger share of power generation.
    The benchmark Henry Hub spot price averaged $11.45 per million cubic feet in
    July, a decline of $1.62/Mcf from June, marking the end of a streak of rising
    prices going back to October of last year.
    The EIA said it expects the Henry Hub spot price to average about $10/Mcf this
    year and $9/Mcf in 2009.
    U.S. imports of liquefied natural gas remain low, the EIA said, noting that
    high demand in the Asia-Pacific region and in Europe continues to lure
    shipments. Meanwhile, repairs, maintenance and delays to new liquefaction
    projects have limited availability.
    LNG imports are expected to total 390 billion cubic feet this year. In 2009,
    LNG imports are forecast to grow to 480 Bcf, as new supplies come online,
    though this remains well down from the record 771 Bcf of LNG imports seen last
    “While a significant increase in global liquefaction capacity is projected in
    2009, continuing natural gas demand growth and higher relative prices in Europe
    and Asia are expected to attract much of the new supply,” the EIA said.

    -Mark Long, Dow Jones Newswires

    Dow Jones Newswires
    08-12-08 1237ET

  44. 44
    Sambone Says:

    N – #42, I agree. I like ETF’s on the short side. These can be bght in IRA’s and regular accounts. KIS, (Keep it simple).

  45. 45
    md Says:

    I pasted an almost identical article last week.


    It seems that Blmbg runs reruns as news. Do you see the tide turning in the shipping names

  46. 46
    Sambone Says:

    NEW YORK, Aug 12 (Reuters) – With ample supplies, most
    cash distillates price differentials weakened in the New York
    Harbor on Tuesday adding to losses by benchmark futures,
    traders said.
    Analysts polled by Reuters expect Wednesday’s data from the
    Energy Information Administration will show U.S. distillate
    supplies, which include heating oil and diesel, rose by 1.7
    million barrels last week [EIA/S], continuing a seasonal build.
    Gasoline stocks are seen down 2.1 million barrels.
    In the U.S. Gulf Coast, cash gasoline gave back all of
    Monday’s early gains, with differentials reacting little to
    fresh news of refinery maintenance or outages.
    Citgo is shutting a crude and vacuum unit at the east plant
    of its 156,000 barrels per day refinery in Corpus Christi,
    Texas, from Tuesday and until Aug. 16.
    Conoco plans a 10-day maintenance on a unit linked to the
    gasoline-making FCC at its Borger, Texas, refinery starting
    Tuesday. Exxon was restarting a hydrocracker at
    its Baytown, Texas refinery after an upset.
    NYMEX crude, heat oil and gasoline futures were off.
    Jim Ritterbusch of Ritterbusch and Associates said he
    expects heating oil to resume its role as downside leader in
    the complex “especially if tomorrow’s EIA stats posts another
    distillate stock build of more than 1 to 2 million barrels.”
    Despite the expected build in gasoline stocks, the gasoline
    outlook is likely to be bearish since a significant supply
    surplus of at least 4 to 5 million barrels will likely remain
    intact amid continued weak demand, Ritterbusch added in a
    report on Tuesday.
    Newly prompt cycle 47 M2 gasoline traded at 4 cents over
    the September RBOB benchmark, down the 3.50 cents it gained
    Monday on scheduling.
    Cycle 48 M2 traded at 0.50 cent and then a penny over
    September futures.
    Cycle 46 ultra-low sulfur diesel 61-grade was steady,
    trading at 3.25 and 3 cents over the September heating oil

    The middle distillates were again pressured by seasonally
    lower demand and ample supplies. Heating oil barges traded at
    4.00 cents under the benchmark September NYMEX futures, down
    from offers at 3.75 cents under on Monday.
    Jet fuel fell to 8 by 8.50 cents over the September
    futures, down from 11 cents over a day earlier.
    ULSD diesel offers were at 6.75 by 6 over the heating oil
    futures, compared with 6.50 cents over a day earlier.
    M2 regular conventional was reported done at 4.50 cents
    under the September RBOB futures, down about half a cent, while
    any month barrels fetched 4.75 cents under, up a tad.
    Premium V2 was set at 14.50 cents over and H2 PBOB near 16
    cents, both little changed.

    Gasoline in Chicago continued to move up, as strong demand
    in Chicago due to refinery outages supported differentials.
    Chicago cycle 2 gasoline was pegged at 29 cents over the
    September RBOB board, up about 3 cents over Monday’s levels.
    Gasoline in Group Three traded at 12.50 cents over the
    September board.
    Ultra-low sulfur diesel in Chicago was steady, pegged at
    2.50/3.25 over the September heating oil board for cycle 2
    barrels, with cycle 3 barrels about half a penny higher.
    Group ultra-low sulfur diesel was pegged at 7.50/8 cents
    over the September benchmark, flat to Monday’s levels.

    (Reporting by Haitham Haddadin and Rebekah Kebede)

    Tue Aug 12 16:45:05 2008 -GMT- pnac

  47. 47
    zman Says:

    Nicky – 42, I agree with Sam.

    On bulkers, I think they pick up post Olympics, China is short on coal and will need to restock. The EXM call went very well and I while they aren’t expensive I figure I have a little time to wade back into that group…those often trade with the broader markets so if you think the broad is due to dip now is probably not the time for them. Same goes for coal prices relative to China and those stocks have been beaten up with the rest of the energy complex.

    Know I’m not too chatty in here but I don’t force myself to do trades in a market like this. Just doing some reading and will listen to PQ and GDP later today at the Denver oil and gas conference.

  48. 48
    1520sbroad Says:

    38,39 – couldn’t agree more on the state of the broader economy. Lots of chop in the next few months, years? I have had trouble getting my head around the housing inventory that is still sitting out there on the market or in some part of the foreclosure process. 30yr conforming loans at 6.50+ are not going to lead potential buyers to jump back in (jumbos at 7.50+). If conforming loans were 5.50 i think this is a different story. How we get to 5.50 is a mystery – particularly if the fed “has” to put on the inflation fighter hat and raise rates.

    I think cash is a good spot for the moment. I’ve been selling calls against my energy stuff too. In my mind energy is still the spot to be long run.

  49. 49
    Sambone Says:

    By Benoit Faucon

    LONDON (Dow Jones)–BP PLC (BP) Tuesday halted oil and gas pipeline flows
    through Georgia, confirming fears that the conflict in the Caucasus Russia
    could disrupt global supplies.
    The interruption was made before Russia announced it was ending military
    operations in Georgia. But it comes after the Caucasus country claimed Russia
    had bombed the pipelines and another route in Turkey was shut down.
    The events have now cut off the bulk of an oil and gas route, estimated at up
    to 1.6 million barrels of oil equivalent per day and initially designed to
    bypass Russia.
    BP said it was temporarily closing the Baku-Supsa line, of which it is the
    largest shareholder. The line carries an estimated 150,000 barrels a day of
    crude from Azerbaijan to the Georgian port of Supsa.
    The route had been used as an alternative to the Baku-Tbilisi-Ceyhan, or BTC,
    oil pipeline, which carries 850,000 b/d and was shut down last Wednesday
    following a fire.
    BP Tuesday also said it was interrupting flows from its Azerbaijan natural gas
    field to the South Caucasus Pipeline, or SCP, which crosses Georgia.
    SCP carries production from Shah Deniz, where output was in excess of about
    14.2 million cubic meters of gas a day at the end of 2007. BP, which operates
    both SCP and Shah Deniz, said that gas flow continues on the Turkish side.
    The shutdown of the Baku-Supsa pipeline means BP is running out of options to
    replace the 850,000 b/d BTC route.
    It is now using railroads to export oil from Azerbaijan through Georgia. The
    Georgian port of Batumi can receive an average 200,000 b/d via rail. The
    other remaining route for BP’s Azerbaijan crude goes to Russia – ending at the
    port of Novorossiisk – and has a 100,000 b/d capacity.
    Analysts say Georgian disruptions will benefit Russia as an international oil
    Robert Johnston, director of energy and natural resources at consultancy
    Eurasia Group, late Monday said in a conference call that the Russia-Georgia
    conflict will help Russia maintain a stranglehold on Central Asian oil and gas
    “Georgia’s reputation as a safe alternate route for pipelines bringing oil and
    gas from (Central Asia) into the Mediterranean has been compromised,” he said.
    “If you take the Georgian option off the table … it plays into Russian hands
    because most of the other viable options go through Russian territory.”
    A BP spokesman said the decision to shut down the pipelines in Georgia was
    taken before Russian President Dmitry Medvedev ordered an end to operations in
    Georgia Tuesday. The company said it was based on news flow about the conflict.
    News agencies earlier Tuesday reported that Russian warplanes were bombing the
    Georgian town of Gori, expanding operations outside the South Ossetia region
    where the conflict had started.
    The BP spokesman denied any connection between the decision to shut down the
    oil pipeline and Georgian claims that the two oil routes had been bombed by
    Russia denies the attacks and BP said it has no evidence of damages on the

    -By Benoit Faucon, Dow Jones Newswires (James Herron in London and Aida Sultanova in Baku contributed to this

    Dow Jones Newswires
    08-12-08 1317ET

  50. 50
    zman Says:

    1520 – I agree re cash and long term energy.

    Can’t force a trade in this market or at least it is not smart. Witness NG falling to meet the decline in crude and the group just sighing lower. My losses in August are pretty much what they are at present. I don’t see a reason to add to them by bottom fishing here. I would buy puts on USO or UNG but I believe we will get a dip then bounce in oil and a bounce in natural gas.

  51. 51
    zman Says:

    Sam the part about analysts saying the disruption will benefit Russia is the understatement of the year.

    A guy early this morning on CNBC said that the lack of notice from the oil market to this and other real supply interruptions of late is very telling. He’s not wrong. Spreads are pretty tight and USO puts as that market has become a little more liquid of late.

  52. 52
    ram Says:

    What is the 25-NSE that CHK filed on 8/11? Are they removing shares?

  53. 53
    zman Says:

    EIA says NG U.S. supply to be:

    8% in 2008, up from previous 6.4% (and in line with the last month available vs year ago levels)

    2009 now seen up 3.7% (I was saying 3 to 5% earlier)

  54. 54
    1520sbroad Says:

    I don’t watch or pay much attention to cramer but i was just watching the weather and flipped by cnbc as cramer was getting fired up about ng and ng stocks. a big fwiw…

  55. 55
    zman Says:

    Ram – it is the redemption of a tranche of debt.

    1520 – I only bought HK b/c he told me to at $46! LOLOLOL. Actually, he discovered it at $46 and I thought I was late to the party at $12 and didn’t get long until $18. His reasoning is charts I’m sure which in this market is not a bad one.

  56. 56
    Nicky Says:

    Cramer ready to jump back into nat gas stocks…

    Z and Sam – what about the inverse S & P index funds at Rydex (Ursa) and Profunds (Bear ProFund) or even the Rydex Tempest which is doubly short the S & P and Venture which is double short the Nasdaq 100.

  57. 57
    ram Says:

    Thanks. It sounds like it is a good thing.

  58. 58
    ram Says:

    Go Nicky Go, Go Nicky Go, …..

  59. 59
    Sambone Says:

    I guess everybody saw the news on OVX, the new index based upon options on the US Oil Fund.


  60. 60
    zman Says:

    Nicky – out of my area but interesting. Why the Nas100, why not the little ones? Also, do you know of a muni-bond fund short ETF/ I think municipalities are going to have a tough time with the lower revenues from lower home price assessments. I called my assossors office a few months ago and argued my bill lower saying that this lousy economy had eroded the value of my property. They went for it. I know varies from place to place but GO bonds are funded by property taxes in many places.

  61. 61
    1520sbroad Says:

    cramer has a lot of entertainment value. he reminds me of a guy i used to work for – all bluster, lots of antics, daisy cutter conversation style (so much force, volume and information that you couldn’t even try to understand but were forced to agree just to try and make it stop.) broken clocks are right twice a day.

  62. 62
    zman Says:

    No, thanks Sam, will look at. Please always bring those things to my sometime tunnel vision attention.

    Little rally looks to be the Cramer effect. Unreal.

  63. 63
    Nicky Says:

    Nat gas has to get above the 9.100 area for me to have some confidence a low may be in place. Until then target areas on the downside are the 7.80 region and then 7.3 – 7.5.

    Cramer now thinking we should buy gold…. hmmmmm

  64. 64
    zman Says:

    Nicky – agreed, re nat gas levels. People are worried about the gas glut potential of the shales, charts look weak to me. I don’t think there is a glut but the perception is there will be and that LNG will return as well.

  65. 65
    cadillac Says:

    What I would like to short is the Health Care Industry. I hope no one on this board is going to take offense to this…but the cost of health care has gone from bad to worse and The pensioneers(sp?) in this country are going to revolt if it continues to escalate. I still can’t wrap my head around how costs can continue to escalate at double digits in perpetuity.

    Z, I’m sure you feel the pinch unless your significant other has a great health care plan…It must cost you a fortune for insurance as a small independant.

  66. 66
    Sambone Says:

    (Updates with latest NHC report)
    NEW YORK, Aug 12 (Reuters) – Energy and commodities markets watched a
    couple of low-pressure systems in the Atlantic Ocean on Tuesday that could
    develop into tropical depressions over the next day or so.
    Neither system, however, is expected to reach the oil rich Gulf of
    Mexico this week, if at all, according to the major weather models.
    In the central Atlantic, the broad area of low pressure associated
    with a tropical wave about 550 miles east of the Lesser Antilles could
    still develop into a tropical depression over the next day or so as it
    moves west-northwest at 10 to 15 miles per hour, the U.S. National
    Hurricane Center said in its 2 p.m. EDT (1800 GMT) report.
    The NHC said an Air Force Reserve hurricane hunter aircraft was enroute
    to investigate the central Atlantic system.
    Most weather models showed the central Atlantic system would steer
    north of the Lesser Antilles and reach the Bahamas in about five days.
    In the eastern Atlantic, the NHC said another broad area of low
    pressure about 400 miles west-southwest of the Cape Verde Islands remains
    disorganized but could slowly develop over the next couple of days as it
    moves west-northwest at 10 to 15 mph.
    Most weather models showed the Cape Verde system would not threaten
    land in North America this week. It should be about 1,000 miles northeast
    of the Virgin Islands in about five days, according to the latest weather
    If either system strengthens into a tropical storm, with winds of 39 to
    73 mph, the NHC will name it Fay.
    Energy traders watch for storms that could enter the Gulf of Mexico and
    threaten U.S. oil and gas production facilities.
    Commodities traders likewise watch storms that could hit agriculture
    crops like citrus and cotton in Florida and other states along the Gulf
    Coast to Texas.
    (Reporting by Scott DiSavino; Editing by John Picinich)

    Tue Aug 12 18:18:46 2008 -GMT- pnac (

  67. 67
    zman Says:

    Cadillac – most heartily agree although those are considered safety stocks right now.

    As to costs, no kidding I saw average health insurance plan to be up 8% for 2009 from the employee side and analysts said that was cheap compared to recent growth and what they had thought making me think it will be up more. The costs of being self employed are high. I especially love the unemployment tax which I pay but can never collect and along those same lines the double FICA. I did not Cobra for a few months when I left my firm and that cost a couple of grand a month…put the wife back to work in software dev which is a whole lot cheaper. But at least I’ve never had her fish my phone out of the toilet.

  68. 68
    zman Says:

    Oil cracking lower again…I really think they want to test $110 and since pipeline disruptions seem to make it go lower, dollar up or dollar down same…I’m sitting back and watching this play out.

  69. 69
    Nicky Says:

    I had my 200 dma for crude wrong earlier – it should have said 109.64. This may be important tomorrow…

  70. 70
    md Says:

    on that note LNG (the stock) shot up yesterday on better than expected losses.
    Much better stocks in the field but I observe it for import activity.

    Any plans soon to update your WIOWIO .
    Have you considered a WI Watching WIW page. Is there a way to value companies say on $8.00 $9.00 and $10. scenarios

  71. 71
    zman Says:

    MD – Will update WIOWIO soon, July threw a monkey wrench into ownership. Will do a skeleton of what I’m watching for tomorrow as I am working on it now, just back thoughts for the moment.

    On pricing under different scenarios it is not too difficult to do or to show for favorite names with a reasonable degree of accuracy. Will see if I have a sensitivity table for the E&Ps (I assume you are thinking E&Ps) lying around.

    Go Cramer, its your birthday.

  72. 72
    Fred Says:

    From the Jim Kunstler web site on Russian attack.


    “These geological matters form the base on which the geopolitical issues work their hoodoo. For instance, the war currently underway in former Soviet Georgia (I say this in case the folks in Atlanta wonder why Stone Mountain is not being bombed) will at least end up with Russia in control of the major oil pipeline that runs from the Caspian region across Georgia, through Turkey, to Europe — even while parts of that pipeline get blown up. The net effect will be of Russia will taking control of even more of the oil now flowing to Europe. The whole point of building that pipeline was to bypass Russia, which was crippled by its own paradigm shift in the years when the pipeline was built.
    The US might talk tough about this threat to the status quo, but what is it going to do? Pull troops out of Iraq and Afghanistan to mount a land war against Russia in a landlocked region of its own neighborhood? Fuggeddabowdit. Notice, the Europeans are not making so much as a peep — because when the time comes that Russia does control that pipeline, the Europeans will do anything to keep the contents flowing toward them. Europe may be organized as a trade-and-currency confederation, but not as a military power. NATO is strictly a US auxiliary, not a power unto itself. The result of all this will be that Russia, already the world’s leading oil producer, even as it has entered depletion, will now possess a potent geopolitical-and-financial weapon with control of that pipeline. A collateral effect will be Europe’s inclination to bid more desperately for Middle East oil — the oil that comes via the Suez Canal — which can’t help but boost the price-per-barrel that the US is forced to pay.”

  73. 73
    zman Says:

    Stocks signaling a turn in oil pretty clearly now if you look at E&P and service moving higher and refiners, which by all accounts should be up, moving lower. The stocks may of course be wrong but its a pretty clear demarcation with the indie refiners down and the majors mixed.

  74. 74
    mahout Says:

    I’m shocked.”Put the wife back to work in software dev”? How could you?

  75. 75
    Popeye Says:

    For the third time in what 9 months? HK has shrugged off share dilution. I guess they put the money to good use. This is a new experience for me.

  76. 76
    zman Says:

    Analysts / Traders looking for another 2 to 3 mm barrel draw down of gasoline supplies tomorrow. I suspect consumers are filling up now as prices approach $3.50 and $3.60s in many parts of the country. Gas station owners too as you should see some more restocking with Labor day less than 3 weeks away.

  77. 77
    zman Says:

    P – CHK did too for a day, I’m not convinced and will keep my HK $35 September calls in play but not add. The higher strikes I could not shed the other day will be gone on Saturday leaving me with stock and those Septs.

    PQ call in about 10 minutes.

    Mahout – she really likes software, what can I say.

  78. 78
    mahout Says:

    Excellent analysis in #38.
    My optimistic side HAS to be kept in check, for sure.
    I like: “keep powder dry”, for now, hoping the mists will clear enough to raise confidence in the return of sanity.
    On general adaptability of the American economy: Unless D.C., with much higher taxes, messes it up by reducing incentive.
    Here’s to peering into the mists of the future! Lots of luck to us all.

  79. 79
    tomdavis12 Says:

    Z: Do you have your list of your top 10 pretty girls? When they change the music do you know which ones you want to dance with? I intend to be more aggressive when crude closes over $121. Since you keep listening to more calls all the time, I assume you change your mind regularly.

  80. 80
    zman Says:

    Tom – I do, although I think it is 6 names that I want to own common in and trade calls around. I listen to the calls but they generally reinforce what I’m thinking. I’ll have it tomorrow’s post. Now real surprises in the list, well maybe one or two on the smaller cap size but those will require patience.

  81. 81
    BirdsofpreyRcool Says:

    guess KeyBanc is done placing those KOG secondary shares. Stock trading up… even though it appears KOG is not officially on the schedule at the conference this week. odd… as KOG is a Denver-based company.

  82. 82
    zman Says:

    Can’t get into the PQ call.

  83. 83
    BirdsofpreyRcool Says:

    can’t either… just keeps looping around

  84. 84
    zman Says:

    that was the 7th down close for oil in the last 8 sessions. 5 up closes since the peak, none consecutive.

  85. 85
    zman Says:

    I’m sure they were not going to saying anything new anyway but ya never know. Such a cheap story.

    Will listen to GDP in a bit.

  86. 86
    md Says:

    What happened to your follow up on GMXR. Will it show up tomorrow

  87. 87
    zman Says:

    Nope – not ready

  88. 88
    md Says:

    Notwithstanding the NG is local argument NG is trading at a very low 41% BTU of CL. It should be closer to 50%.

  89. 89
    isleworth Says:

    Z – what is PQ call about?

  90. 90
    isleworth Says:

    PQ earnings call was last week, right?

  91. 91
    zman Says:

    Isle – yes, PQ was last week, this was the Denver oil and gas conference 10-14.

    Schedule below. Pq’s link was bad.


  92. 92
    isleworth Says:

    ok tks much pal

  93. 93
    mahout Says:

    NG is a BTU beauty! But why not a good deal higher than 50%? Is 6 to 1 gone forever? I’m trying to learn.
    In #43 EIA predicted Henry Hub Spot to Avg. $9/MCF in 2009. I think they’ll have to eat those words. I just believe unscientifically that it will be north of 10 Bucks. BTU beauty is part of it. In Canada, a lot more NG going to cook bitumin (I even know what that is now) that used to come to us. And Russia will surely continue jacking up prices to Europe on NG reducing our imports.
    Am I wrong? I’m trying to learn.

  94. 94
    md Says:

    Sorry, just came back online. I defer to Z on BTU. But 50% is a normal range from what I have obserced at this time of year.

  95. 95
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